City Council could decide today on a tax increase

Council will consider three-eighths of 1 percent increase

By Steve Ramirez

sramirez@lcsun-news.com @SteveRamirez6 on Twitter

Posted:
09/02/2013 04:48:31 PM MDT

LAS CRUCES >> The unknowns of a proposed three-eighths of 1 percent city gross receipts tax increase could become the deciding factors as the Las Cruces City Council considers adoption of a new tax rate.

A council vote could come at today's 1 p.m. meeting at City Hall, 700 N. Main St. The decision is anticipated to be closely monitored by other municipal and county governments across the state who are also considering increases.

Gov. Susanna Martinez and her top advisers could also be following what city officials will be saying and doing. Some southern New Mexico legislators said late last week they believe Martinez and her administration could consider introducing legislation that would shorten the planned 15-year phase-in to repeal the state's Hold Harmless Act, which has provided state payments to municipalities and counties since 2004 for waiving the collection of taxes on food, medicine and some medical services.

Last year, Las Cruces received a little more than $8.7 million in state Hold Harmless payments.

Advertisement

"I've heard gossip the governor might introduce legislation if communities, like Las Cruces, increase their taxes," said state Sen. Mary Kay Papen, D-Las Cruces, who also serves on the Senate Finance Committee. "Let me emphasize that I don't know that for sure; I've only heard something like that might happen. But I also don't know if that legislation could be introduced, and I'm not sure if it would pass or not. I don't know."

Mayor Ken Miyagishima said it's those uncertainties that have caused city officials to pursue a sales tax increase.

"It doesn't surprise me the governor could be considering something like that," said Miyagishima, of the potential legislation that could factor into what the council ultimately decides. "We're doing this because of the state's actions. During the last legislative session we continued to be told that the legislation to repeal Hold Harmless wasn't going to be adopted by the Legislature, but it happened -- in the last seven minutes of the session. Because of those actions, that legislation, we're only doing this to cover our downside."

An $8.7 million reduction in revenue would amount to about 10 percent of the city budget for the current fiscal year. In the 15 years that Hold Harmless payments would be gradually phased out, city officials estimate as much as $124.7 million in revenues could be lost, unless a tax increase is imposed.

"A good thing about this is that if we were to adopt a three-eighths sales tax increase it would be totally independent of what state government does," Miyagishima said. "It would keep us at an intact level."

Proceeds from a three-eighths of 1 percent sales tax increase would be invested in a separate, special fund, much like the city's "Telshor Fund," which has generated interest from the approximately $24 million in pre-paid lease payments the city has received for Memorial Medical Center. Miyagishima and City Manager Robert Garza have said the profits from the windfall of the lease payment have increased to about $32 million.

"It would be totally, completely transparent to the public, very much the same way as the city has managed the Telshor Fund," Miyagishima said. "We would show residents on a regular basis, where that money is going and what it's doing."

Miyagishima added the unknowns could also end up in positive circumstances for the city.

"If things change, we could always diffuse those bonds earlier than the 15 years, and the tax (increase) would go away," Miyagishima said.

In three public meetings conducted last month, city officials said a three-eighths of 1 percent increase would be sought because they believed state government -- either the Legislature or the governor -- could reduce the amount of sales tax city or county governments could implement. They told residents anything less than a three-eighths increase wouldn't come close to replacing the amount of state funds that will be phased out. Reductions in those revenues could compel city government to cut programs and services offered to residents.